Silver as an investment

The Toxic Fruit of Financialization: Risk Is for Those at the Bottom

charles hugh smith

charleshughsmith.blogspot.com / CHARLES HUGH SMITH / WEDNESDAY, JULY 26, 2017

Those who have pushed the risk down the wealth-power pyramid are confident the Federal Reserve will continue to limit the risks of speculative financialization.

One of the most pernicious consequences of financialization is the shifting of risk from the top of the wealth-power pyramid to the bottom: those who benefit the most from financialization’s leveraged, speculative credit bubbles protect themselves from losses while those at the bottom of the pyramid (the bottom 99.5%) face the full fury of financialization’s formidable risk.

Longtime correspondent Chad D. and I recently exchanged emails exploring how the higher debt loads and higher interest payments of financialization inhibits people at the bottom of the wealth-power pyramid (i.e. debt-serfs) from taking risks such as starting a small business.

But this is only one serving of financialization’s toxic banquet of risk-related consequences. Chad summarized how those at the apex of the wealth-power pyramid protect themselves from risk and losses.

At the top levels of the pyramid, members in those groups collect way more interest than they pay out and at the very top, they get a ton of interest and pay little to none. The people at the top can take all sorts of risk, because of this dynamic and further, they also usually have a heavy influence on the financial/political machinery, so they get bailed out by taxpayers when their investments go bad. In addition, because their influence extends to the criminal justice system, they are able to commit fraud and at the same time neutralize regulators and prosecutors, thereby escaping any ramifications from their excessive risk taking and in many cases massive fraud.

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